Asian markets are expected to display caution on Wednesday due to two main reasons. Firstly, there is lingering concern over the health of the U.S. economy. Secondly, investors are also awaiting Nvidia’s earnings report later in the day. While U.S. and world stocks saw a slight increase on Tuesday, the dollar experienced a dip and Treasury yields remained relatively stable. However, these factors do not provide much direction for investors in Asia.
In the absence of clear global catalysts, regional events are expected to carry added weight on Wednesday. Bank of Japan Deputy Governor Ryozo Himino is scheduled to speak following BOJ Governor Kazuo Ueda’s recent public remarks, which indicated a hawkish stance. This suggests that further tightening may be on the cards beyond the minimal rate hikes currently priced in by markets.
One of the key economic indicators in the Asia/Pacific region on Wednesday will be Australian inflation data. Economists anticipate a slowdown in annual weighted consumer price inflation to 3.4% in July from 3.8% in June. This would bring inflation closer to the Reserve Bank of Australia’s target range of 2%-3%. The RBA has maintained its cash rate at 4.35% since November last year, with no rate cuts expected until December according to the Aussie swaps market.
Thailand’s deputy finance minister Julapun Amornvivat and central bank governor Sethaput Suthiwartnarueput are set to speak at a business seminar. The country has seen ongoing tension between the government and central bank regarding interest rates. While the Bank of Thailand has kept rates steady at 2.50%, the newly-appointed Prime Minister has expressed views on central bank independence impact on economic growth. The Thai baht, despite its low yields, has surged in recent weeks, possibly influenced by the central bank’s reluctance to cut rates.
Amidst these regional developments, the U.S. dollar’s persistent weakness stands out as a notable global driver for investors in Asia. The currency recently hit a new low for the year against a basket of major currencies, impacting exchange rates across the region. This adds a layer of uncertainty for investors navigating Asian markets on Wednesday.
The cautious mood in Asian markets stems from a combination of global economic concerns, regional events, key economic indicators, political tensions in Thailand, and the ongoing weakness of the U.S. dollar. Investors will need to closely monitor these factors to make informed decisions and navigate the fluctuations in Asian markets effectively.